Northern District of Illinois Denies FTC’s Bid To Enjoin Chicago Hospital Merger
 

On June 14, 2016, Judge Jorge Alonso of the United States District Court for the Northern District of Illinois denied the Federal Trade Commission’s (“FTC”) motion for a preliminary injunction against the merger of Advocate Health Care (“Advocate”) and NorthShore University HealthSystem (“NorthShore”), which operate hospitals in Chicago’s northern suburbs. Order, Federal Trade Comm’n v. Advocate Health Care Network, No. 15 C 11473 (N.D. Ill. June 14, 2016), ECF No. 472. The Order held that the FTC failed to show a likelihood that it would succeed on the merits of its antitrust claims. 

This is the second case in the last two months in which a court has denied a bid by the FTC to block a hospital merger on antitrust grounds.  In May 2016, the United States District Court for the Middle District of Pennsylvania denied the FTC’s motion to enjoin the merger of two hospital networks operating in the Harrisburg, PA area, on grounds that the FTC’s definition of the relevant geographic market – four counties centered on Harrisburg, PA – was “unrealistically narrow and does not assume the commercial realities faced by consumers in the region.”  Fed. Trade Comm’n v. Penn State Hershey Med. Ctr., No. 15-cv-2362, 2016 WL 2622372 (M.D. Pa. May 9, 2016). In the Penn State case, the Court found that there were many additional hospitals outside the four-county region, within a 65 minute drive of Harrisburg, that could readily compete with the merged entity, and that over 40 percent of patients at one of the merging hospitals come from outside the four-county market. Further, the Court was persuaded that the merger would provide immediate benefits to consumers, by allowing one of the hospitals to solve its overcrowding problems by merging with a nearby hospital system with spare capacity. 

In persuading Judge Alonso to reject the FTC’s bid for an injunction against their merger, Advocate and NorthShore relied on arguments similar to the ones adopted by Penn State. While the FTC emphasized that the merged entity would control six out of eleven hospitals in Chicago’s North Shore suburbs, defendants pointed out that the government’s market definition excluded large swaths of Chicago and failed to account for how far patients are willing to travel. Defendants also argued the merger would benefit consumers, by allowing the hospitals to offer a new low-cost insurance product in competition with incumbent insurers. 

The Court’s opinion, which will be released to the public at a future date after the parties have had the opportunity to propose redactions, is expected to further explain its reasoning and will likely provide insight into the hurdles the government will face in trying to block future mergers in a consolidating health care industry.